# How to Calculate VaR Using Delta-Normal Method in Excel

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Looking for a way to calculate VaR using the Delta-Normal method in Excel? Well, you have come to the right place. In this article, we will walk you through four easy steps to calculate VaR using the Delta-Normal method in Excel effectively and with appropriate illustrations.

## Introduction to VaR

VaR stands for Value at Risk. VaR is a statistic that is used to forecast the biggest losses over a certain period of time. The magnitude and chance of possible losses in portfolios can be calculated using VaR. VaR is a tool used by financial companies to estimate and manage the degree of exposure to risk.

## Calculate VaR Using Delta-Normal Method in Excel: 4 Easy Steps

In this article, we will demonstrate 4 easy steps to calculate VaR using the Delta-Normal method. We will use the following dataset for this purpose.

### Step 1: Create Dataset with Proper Parameters

In this step, we will create a dataset with the necessary parameters. You must have the values of these parameters to calculate VaR using the Delta-Normal method in Excel.

• First of all, we will insert the value of the Portfolio.
• Next, we need the value of the Average Return. We assumed the Average Return value of 201.
• Then we require Standard Deviation. Let us take the value for a Standard Deviation as 119.
• Finally, 99 is taken as the Confidence Level.

### Step 2: Find Minimum Return

In this step, we will use the NORM.INV function to find the value of Minimum Return to calculate VaR using the Delta-Normal method. Letâ€™s follow the instructions below to learn!

• First, select cell C10 and write down the following formula.
`=NORM.INV(1-C8,C6,C7)`
• This formula returns the inverse of the normal distribution for the mean of 0.201 and a standard deviation of 0.119.
• After that, hit Enter to get the value of the Minimum Return. The minimum value is -0.07584.

### Step 3: Calculate Value of Portfolio

Now we need to calculate the value of the new Portfolio to determine Delta-Normal VaR in Excel.

• First of all, select cell C11 and type the following formula.
`=C5*(C10+1)`
• This formula will give the result of the Value of Portfolio as \$462,082.30.

Read More: How to Calculate Delta in Excel

### Step 4: Determine Value at Risk

Finally, we can determine the Value at Risk (VaR) using the previous and new Portfolio values.

• First, select cell C12 and write down the following formula in the formula bar.
`=C5-C11`
• Then press the Enter button to get your desired result.

Notes:
• Donâ€™t forget to give proper cell references or you wonâ€™t get the desired result.

## Conclusion

Thanks for making it this far. I hope you find this article useful. Now you know four easy steps to calculate VaR using the Delta-Normal method in Excel. Please let us know if you have any further queries, and feel free to give us any recommendations in the comment section below.

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Alif Bin Hussain

Hello! Welcome to my Profile. Currently, I am working and doing research on Microsoft Excel and here I will be posting articles related to this. My last educational degree was BSc and my program was Civil Engineering from Bangladesh University of Engineering & Technology (BUET). I am a fresh graduate with a great interest in research and development. I do my best to acquire new information and try to find out the most efficient solutions.

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